Arts and Communication Counselor Inc. Harvard Case Solution & Analysis

Arts and Communication Counselor Inc. Case Study Solution

Introduction:

Arts and Communication Counselors Inc. (Arts and Communication) was formed in the year 1970 by an enthusiastic and young entrepreneur Bonnie Hill man, the main source of revenue of the Arts and Communication is to arrange sponsorship arrangements for the theater and exhibitions of arts and the company also collects revenues by providing the services regarding experiential marketing. The economic conditions for the Arts and Communication was very favorable and positive until recently, however, after the great economic recessions the operations of Arts and Communication are greatly affected. Almost all the industries have been affected by this recession but the marketing services providers are affected more adversely than some other service providers. The fact that the earnings and profits of almost all the companies have been affected by the recession enforces management to reduce the level of marketing expenditures, this reduction on the marketing budget directly affected the operations and profits of Arts and communication. On the other hand, the recent drastic change in the technologies have also adversely impacted the profits of Arts and Communication, social media and easy communication by e-mails allows had provided the opportunity to the clients of Arts and Communication to communicate directly with the management of sponsors, thus eliminating Arts and Communication from the middle and avoid the unnecessary costs. In order to mitigate the consequences of these adverse changes in the economic and technological environment, Hillman is considering to develop a new source of income i.e. to develop public relation service department. The development of this division can have very positive consequences on the profitability and future operations of the Arts and Communication.

Issues and Constraints:

There are many issues and constraints that pertains with the business model and the operations of the Arts and Communication, the main issues which the management and company is facing are the significant reduction in revenues and profits, inability to retain the customers and failure to identify the appropriate strategies which can help the management and Arts and Communication out from this depressed conditions.

As discussed above the economic conditions of the region are very unfavorable for the businesses, the inflation and unemployment is rising and the competition is also increasing which further makes it difficult for the Arts and Communication to maintain the level of profits and to contain the competitive advantage. The clients of Arts and Communication are small companies, a very low proportionate of their clients are large companies. The smaller companies are finding it very difficult to continue to invest in the marketing. Furthermore, many of the companies are also considering sponsoring as a less effective way of marketing as well.

On the other hand, the management of Arts and Communication is also unable to retain the customers, the customer turnover ratio is very high. It can be said that this has very adverse implications on the future performance of the company. They are placing excessive reliance on a single customer The Grey Goose Contract which results in almost one third of the revenueof Arts and Communication. Even the going concern status of the company can be affected if the contract being terminated by The Grey Goose Company.

In addition to this, the management of Arts and Communication including Bonnie Hillman is unable to find most effective way of increasing the revenues and profits. The management should be proactive, they should have to keep an eye on the factors which can have on their profitability and turnover. They should have to be prepare in advance and they should also have to develop defense strategies in order to protect themselves from the adverse changes in the economic environment.

Development and evaluation of the marketing strategies:

The marketing strategies of Arts and Communication seems to be ineffective especially in the difficult trading conditions. It can be said that in order to survive profitably in these conditions, the marketing strategies should have to be developed very critically. The effectiveness of the marketing strategies doesn’t only depends on the nature of the strategy but it also equally depends on the timing of the strategy. The fact that the company is unable to attract new customers depicts the ineffectiveness of the marketing strategies, additionally failure to retain the customers also reflects the poor marketing strategies of Arts and Communication. As the Arts and Communication is itself a marketing services provider, the effectiveness of their own marketing department could damage their reputation and goodwill drastically.

Arts and Communication Counselor Inc. Harvard Case Solution & Analysis

 

Profitability Ratios:

The profitability of the company has increased dramatically with increase in gross and net profit margins. Over the period the gross profit has increased rapidly with 11% in 2010 to 23% in 2011 and 34% in 2012. This indicates the rise in sales revenue and fall in cost of sales. Net profit margin has also increased rapidly. From only 7% in 2010 it went on to become 17% in 2011 to around 25% in 2012. This indicates that the company have managed to implement cost-cutting solutions and have been successful in bringing down the expenses.

The net income to assets ratio after an increase in 2011 to 32% from 23% in 2010 remained constant over the year up to 2012. The net income to shareholder’s equity on the other hand have decreased dramatically from 110% in 2010 to 57% in 2012 meaning that returns being made to shareholders have decreased. This may deter further investment but with high profits and low payment the investors’ interest is still on the increasing side.......................

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